NZX raised eyebrows among financial market participants today by signalling that its first half earnings were likely to fall.
Earnings before interest, tax, depreciation, amortisation, and fair value movements were $9 million to $10 million in the six months ended June 30, down from $11.7m in the same period last year.
The stock exchange operator expects a net profit of between $3m and $4m, compared with a net profit of $4.5m in 2011.
Expenses were between $2m and $3m higher than last year, about two-thirds of the increase arising from a change of chief executive, litigation costs and other non-recurring items.
The company has been involved in ongoing litigation resulting from its purchase of Melbourne-based Clear Grain Exchange in 2009.
In June, NZX was ordered by the County Court of Victoria to pay A$34,800 ($44,311) plus interest and costs to the Ralec group of companies.
The award related to the six months Ralec shareholder Grant Thomas spent working with the stock exchange operator when he sold Clear Grain to NZX.
The announcement took the market by surprise, sending the share price down 14c, or 9.9 per cent, to $1.19. At one point the stock fell to $1.14.
"The share price tells you that it was totally unexpected," said one financial market source.
In its earnings update, NZX said there had been a decline in capital markets activity during the second quarter, locally and overseas.
Equities trading volumes continued to be higher than the previous year, but the value traded declined 12.4 per cent in the second quarter compared to the same period last year, consistent with trends in offshore markets.
Derivatives and commodities trading continued to show strong growth but listings and secondary capital raisings were down significantly on the same period last year.
Although revenues in NZX's Information businesses had grown relative to 2011, the strong uplift in the first quarter was pegged back in the second quarter. This was a consequence of lower seasonal activity and a more cautious setting in the rural economy, the company said.
NZX said secondary issuance picked up in July, and it anticipated the start of the Government's mixed ownership programme for some state-owned assets and the launch of Fonterra's Trading Amongst Farmers would underpin increased listing and trading revenues.
The medium-term outlook for the business remained strong, NZX said, adding it planned to launch equity derivatives in the first half of next year.
NZX will report its first half result on August 20.
The forecast comes a month after former chief executive Mark Weldon sold 3.7 per cent of the company - the bulk of his stake - through its executive share scheme. Weldon left the company on May 4 after being in the job for 10 years.
In a disclosure notice to the NZX on June 29, Weldon said he sold 9.5m shares for $12.5m, equating to an average sale price of $1.31.
Weldon was replaced by business consultant Tim Bennett but retains a stake in the company.
